Four rules for ethical business leaders

Let me first thank Father Dease and the dean for inviting me to speak to you today. I am so honored to be with all the graduates on this most special of days for both you and your families.

I was asked by the dean to speak to you on the topic of ethics ….I think it was on the basis that 3M is a company whose corporate ethics are legendarily positive. I must say at the outset that I feel ill equipped to do so since I’m not a philosopher, nor am I a moralizer – I have far too many flaws for that – but I will speak for a few minutes about my observations on ethics and morals and my own rule book for life.

As students you well might ask, “Why is this topic so important to me?” You’re probably also thinking, “Am I going to be able to stay awake while this guy rabbits on about something I know nothing about…and care about even less?” And at this start of your business life, you might legitimately ask, “Why are ethics and moral values so vital to me anyway? How can they help me? Surely George and the university could have found something more important to say about my upcoming business life than just my ethics.” But to give you the scent of what’s coming, I’ve titled my talk “There but for the Grace of God Go We.”

But instead of starting with the beginning of your life, we’re going to begin with the end. On the day you pass from this life, apart from the very obvious sorrow it will bring to a lot of people, the only thing which will be important in the mind of your family and friends will be your reputation. They’ll be thinking about who you were, how you lived your life and, of course, how very much they’re going to miss you. They’ll be asking themselves …how they will live without you. Was your life good or was it bad, they’ll ponder. That’s what they’ll probably be thinking on that sad day a long time away in the future.

You’ll have established that reputation over a lifetime by what you did and by how well you demonstrated, among other things, your ethics and moral values. There’s no question that you’ll have made some mistakes along the way – maybe even some big ones, as we all do. But hopefully your interview with Almighty God on Judgment Day won’t be too long…or too arduous…and he won’t ask you too many awkward questions.

But in all seriousness, it won’t matter if you’ve made $100 million in your lifetime or made $10,000. Nobody will care about that detail on that day, but they will care about your code of ethics and your moral conduct. That’s the real legacy you’ll leave behind, and why it’s so important to you here today as you begin this new journey of business life. The book of memories that’s written in the minds of your family and friends will record what you did with your life and how you treated others along the way….not how much money you made.

We’ve seen all too many examples of people getting themselves into various kinds of ethical and moral trouble lately. Look at the sad case of Tiger Woods, or at Dennis Koslowski, the former CEO of Tyco, Eliot Spitzer, Bernie Madoff, or the unfortunate folks at Arthur Anderson or those at Enron. And there are many others, too.

We don’t know anything about the good these people did in their lives – and there was probably quite a bit of it – because it’s all overshadowed by the bad choices they made. Nobody is speaking about the good right now simply because they are too busy speaking about the bad. The lives of these people are now defined by their mistakes and not by their successes. Ethics and moral values are like gravity: If you don’t work hard to keep them up, they will most certainly drag you down.

As a matter of principle, however, I think it’s very unwise for any of us to sit in judgment of other people who’ve made mistakes because the fact is that we’ve all made mistakes and we’ll probably make a few more before we are done. And you never know how grave the next mistake you’ll make will be…and it could be just around the corner. My grandmother would have said here, “George, don’t temp providence.” So, as I said, it’s always best to think, “There but for the Grace of God, go we.” What’s that common saying you hear all the time? “The man who never made a mistake never made anything.”

But on the other hand, it’s always better to learn from somebody else’s mistakes than your own. We’re all under temptation, whether you are a fairly religious man like myself…and perhaps you blame the devil for the temptation you face…. or if you’re a non-religious person and you blame human frailties. The message is essentially the same and the traps that catch us out are still the same ones, whatever our persuasion might be. We all like to feel we’ll be the exception to the rule, that it won’t go wrong for us, that we can handle it. But in reality, the slippery slope of poor ethics and weak moral values is not one we want to be voluntarily riding on …or maybe I should say “sliding” on.

In my prayers, I’ve often asked Almighty God to protect me from making those and many other kinds of mistakes in my life and to keep me away from the trips and traps that are so easy to fall into. As humans, it’s all too easy to get caught out by them. So I emphasize again that, before criticizing others, I sometimes simply think again of the phrase “there but for the Grace of God go I.”

The pitfalls are so very easy to fall into…. even for the wise and the wary. Best we know about the more obvious ones so that we can avoid them if we can.

So I think it’s important here to observe the principal mechanisms by which people get themselves into trouble and create ethical or moral dilemmas for themselves, if only to try to help alert each of us as individuals how to keep out of it. And even then, it’s not that easy. So let’s explore a few of them, shall we?

The first question to ponder is….how does it happen? Is there any common theme we can identify where people fall into these traps? I recall giving a speech to a group of finance executives in Chicago just shortly after the famous accounting company Arthur Andersen got themselves into difficulties over Enron. I was asked the question by someone in the audience, “How did they (i.e. Arthur Andersen) get themselves into so much trouble?” I think people expected me to give a long and erudite answer, but instead I gave them a short, one-word answer, that I think was far more accurate than any long one I could have dreamed up. I said “the answer is ‘slowly.’” So I say it here again to all of you: the answer is “slowly.”

That’s how most of us do it when we get ourselves into trouble…slowly We allow ourselves to compromise standards on what we often know to be wrong and begin a slow slide down a slippery slope of deteriorating values. At the bottom of that slope is a figurative pit of vipers that will destroy our reputation…and perhaps even our lives…just as surely as any poisonous snake could do. Best we try to avoid getting on that slippery slope in the first place. And because it happens so slowly, it’s one of the most dangerous and one of the hardest slopes to detect and avoid.

In companies you see this kind of problem crop up most often where their corporate policies and procedures are weak. Somebody tests the boundary and the alarm bells don’t ring. Maybe it’s even accidental the first time. So they test it again…a little further out this time…and the alarm bells don’t ring then, either. Pretty soon, after a few tests, that same somebody is way out on the edge of what’s sensible, and then the ending becomes very predictable, and it is never a happy one.

These offences are nearly always caught or identified at some time in the future and, ironically, they nearly always start with something small. People rarely make big mistakes the first time out. But even if they aren’t caught, this is not a place any of us here today should want to go.

So how do we avoid it? If you don’t mind the dark humor here, it’s said by those who know that the figurative “first murder” is always the hardest. To translate, as crimes or slips in standards occur for us as individuals, the next slip becomes just that bit easier. Pretty soon the successive slips become routine. A pattern of behavior has been established and it’s gotten us into a place we don’t want to be. And so often, the final unhappy ending is not even on the topic of our first slip. It can be in an area completely different and perhaps much more serious than where we started.

So Rule #1 is that the best way to avoid it is, don’t get started in the first place. Don’t take that first small step.

Sometimes the biggest mistakes – and the worst punishments – are reserved for covering up the first mistake. Remember Richard Nixon and Watergate? Or Bill Clinton and his Monica Lewinsky troubles?

So Rule #2 is that, if you make a mistake – and we all do it at times – fess up, apologize, promise yourself never to do it again…and make sure you keep that promise. If you’re in a hole and trying to get out, as the saying goes, the best thing to do first is to stop digging.

To combat this problem, we must have a firmly fixed vision in our minds of what constitutes good and bad. While the reality is that “good” and “bad” are relative judgments, I think we all know what I mean here. I mean “Would I be proud for my grandmother to know I did this or thought that.” I sometimes humorously wonder which interview I fear most when I die: That with the Almighty or that with my grandmother!

So as human beings, what gets us into trouble most easily?

I’ve often observed in life that really smart people only do really stupid things for one of three reasons: power, sex or money. We might exchange the word “power” for “ego” here if we want to admit things like bigotry or hate into our equation. But we all know that the power of these kinds of temptations is very strong. And the more famous and rich you become, the larger it seems the temptation is. We’ve seen many examples of executives engaged in bribe taking, in bonus rigging, Ponzi schemes, embezzlement…or even just plain greed. We’ve also seen example of executives and sports stars getting themselves into trouble with various forms of philandering.

As an engineer, you can imagine that I’m interested in statistics, so I often humorously observe that most people seem to die either in bed or in hospitals, so you can clearly help yourself live a much longer life by avoiding both places.

Now, I’m not sure that I can perfectly apply that statistical avoidance principle to the three catch phrases “power, money and the other thing” I mentioned, since at some level they are all part of our life. (I couldn’t say that “S” word twice in one speech at a Catholic university, now could I?) But we should recognize the tantalizing and seductive temptation that can come our way on these three topics and understand how easily and powerfully they can suborn and undermine our more logical reasoning. Being aware is half the battle.

So that’s Rule #3……know the danger zones and stay away from them.

If that list is not long enough, what else is there?

The Bible says in Proverbs 16:18 “Pride goes before destruction and a haughty spirit before a fall.” This is the root cause of why many executives – CEOs in particular – can fail: personal pride. They start gradually by first listening to, and then believing, their own propaganda or, as we sometimes say, breathing their own exhaust fumes. They stop listening to other people who can help them keep a balanced perspective. While successful CEOs understandably need a lot of self confidence and independence, they can gradually begin to think that they are always right. If they do, pride has taken over…and watch out.

So if I could have one wish from my imaginary Fairy Godmother about corporations, and even myself, it would be to remove all personal pride from them. While words like, “we should be proud of our accomplishments” run off the tongue so very easily, pride can be a very dangerous thing in the wrong place and the wrong context.

So Rule #4 is to avoid being tripped up by personal pride. Listen to others and don’t believe your own propaganda.

What is certain is that, as we go through life, we will all make our mistakes, and I have certainly made my fair share, maybe even more than my fair share. So I’m hoping my Judgment Day interview isn’t too awkward, either.

But the things I’ve outlined are the reasons we should always try to keep our moral and ethical values intact and to protect the memories of our friends and relatives. So, as I said before, “There but for the Grace of God go we all.”

In conclusion, I hope I’ve proven the value of the topic and the importance of steering clear of these pitfalls in life as best we can. Good luck in the journey.

It’s now my very great pleasure to congratulate you once again on your graduation and wish you all the very best in your new careers.